Fuel crisis : How can Nepal cope?

Fuel prices around the world are on a roller-coaster ride. The present havoc in the world fuel market is the result of ever rising consumption, especially in the rapidly growing economies like China and India, and of the failure to address oil market concerns by the Organization of the Petroleum Exporting Countries (OPEC). The perception that supply is struggling to keep up with demand has also contributed to the upward trend in oil prices in the last few months. Disruption in supplies from OPEC member countries like Nigeria (the largest producer in Africa) as well as geopolitical concerns of countries like Venezuela and Iran are acting as the catalysts for the current price volatility.

At the time when major non-OPEC players are blaming OPEC countries for the crisis, Saudi Arabia and other OPEC members say there is no shortage of oil and instead blame financial speculation and the falling US dollar. Economic activities around the world have scaled new heights but oil supply has been almost constant. Is oil politics redefining the global power game, threatening to shift the traditional “power balance” away from Europe and the United States towards the Middle East and Russia?

The fossil fuel crisis must have something to do with the US’s strategic oil reserves, some experts say. Another line of thought centres on the concerns about long-term oil supplies prospects and the consequences of a fossil fuel economy. If declining fossil fuel reserves are indeed the problem, it is time to look into alternative energy and adopt energy saving measures.

What are the options for poor countries like Nepal? Nepal has witnessed an unprecedented rise in fuel prices, especially in the past few months. The scenario is more or less similar in other countries: fuel price hike followed by demonstrations. This is awkward for all the parties concerned. For the government, it’s a mandatory but obviously an unpopular decision; for common people, it is an aggravated discomfort and added difficulty in meeting their daily expenses, epspecially when they are bearing the brunt of already sky-rocketing prices of daily commodities.

If we compare fuel prices around the globe, Nepalis are paying more than even some of the ‘developed’ countries like Saudi Arabia, Malaysia, Russia, the United States and Canada. Nepalis, in ‘general’, cannot afford the current prices. I emphasise ‘general’ as wealth distribution in the country is highly skewed in favour of the rich: the richest 10 per cent hold about 40 per cent of wealth; on the other hand, the poorest 10 per cent survive with less than 3 per cent. So, should the government continue with the subsidies? The answer, probably, is yes.

But where will the money for long-term subsidies come from? From taxpayers or through industrial revenues? Providing subsidy to the poorest in the society is certainly an option. However, proportional and appropriate implementation is the key to success of subsidies. While world fuel prices continue to hit new heights, how long will subsidy policy work, if at

all? Hence we need a long term plan to combat the crisis.

Alternative energy sources like solar and micro-hydropower should be tapped on a larger scale. Shifting to the use of electricity for cooking and heating purposes could be a good option too. However, the ground reality is that we don’t have enough electricity to meet even the existing demand. To some extent, as a short-term measure, massive campaign for a mandatory use of energy efficient appliances can be handy.

As a long-term measure, extensive harnessing of hydro resources should be carried out in order to meet the country’s burgeoning needs. To achieve this, we need huge investment in power sector. Towards this end, we should create a favourable environment for the investors, and also need to deal tactfully with India on energy. Nepal is an ‘India-locked’ country and our policies and activities even regarding energy are dictated more or less by India’s self-interest. However, we should try our best to take advantage of the huge energy requirements of India, which is gradually emerging as a global power.

What about vehicles consuming huge amounts of fuels? We can’t stop using them at once. And it might take some time for the world to come up with alternative for petrolem products. But we could reduce the use of vehicles. Probably, two days of public holidays (Saturday and Sunday) every week might be helpful in reducing the fuel consumption to some extent.

Even though we hope the fuel crisis won’t go on indefinitely, at some level, it will be economical to develop substitutes. The present crisis also compels people to optimise the use of fuel. In Nepali context, there is no alternative to saving energy, promoting micro-hydroelectricity and solar sources, extensively harnessing hydro potential and tactfully dealing with India.

Jha is doing PhD in power system engineering from Hiroshima University